Understanding Income Tax in India
Income tax in India is a direct tax levied by the Central Government on the income earned by individuals, Hindu Undivided Families (HUFs), companies, and other entities during a financial year. The tax is calculated based on predefined slab rates that vary depending on your age and the tax regime you choose.
Filing your Income Tax Return (ITR) is an annual obligation for those whose income exceeds the basic exemption limit. The traditional deadline for filing your return is July 31st of the Assessment Year (AY).
Old vs New Tax Regime: Which is Better?
The Budget has modernized the tax structure by heavily incentivizing the New Tax Regime. Under the New Regime, slab rates have been slashed and the standard deduction for salaried individuals has been increased to ₹75,000 for FY 2025-26. Most importantly, income up to ₹12 lakh is completely tax-free under this regime.
However, the Old Tax Regime still exists and may be beneficial for individuals claiming substantial deductions such as House Rent Allowance (HRA), Section 80C (PPF, ELSS, EPF), Section 80D (Health Insurance), and home loan interest.
New Tax Regime
- Default regime for all taxpayers.
- Zero tax on income up to ₹12,00,000 (after 87A rebate).
- ₹75,000 standard deduction for salaried employees.
- Almost no other exemptions allowed (No HRA, LTA, 80C, etc).
Old Tax Regime
- Requires explicit opt-in during filing.
- Zero tax on income up to ₹5,00,000 (after 87A rebate).
- ₹50,000 standard deduction for salaried employees.
- Allows all ~70 tax deductions including HRA, 80C, 24(b).
Key Tax Deductions Explained (Old Regime)
If you choose to file under the Old Regime, leveraging these sections is critical to minimizing your tax outgo:
- Section 80C (Max ₹1.5 Lakh): Covers life insurance premiums, EPF, ELSS mutual funds, PPF, principal repayment of home loan, and children's tuition fees.
- Section 80D (Max ₹1 Lakh): Covers medical insurance premiums. You can claim up to ₹25,000 for self/family and an additional ₹25,000 for parents (₹50,000 if they are senior citizens).
- Section 24(b) (Max ₹2 Lakh): Allows deduction on the interest portion paid on a home loan for a self-occupied property.
- Section 80CCD(1B) (Max ₹50,000): Over and above 80C, this allows an extra ₹50,000 deduction for investing in the National Pension System (NPS).
Important Dates and Deadlines
Proper tax planning requires knowing your deadlines:
- Financial Year (FY): 1st April 2025 to 31st March 2026. This is the period during which you earn the income.
- Assessment Year (AY): 1st April 2026 to 31st March 2027. This is when your income for the FY is assessed and taxed.
- Advance Tax Deadlines: 15th June (15%), 15th September (45%), 15th December (75%), and 15th March (100%).
- ITR Filing Deadline: Usually 31st July 2026 for individuals whose accounts do not require an audit.